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Would a Legal Minimum Wage Reduce Poverty? A Micro-simulation Study for Germany

Author

Listed:
  • Kai-Uwe Müller

    (German Institute for Economic Research (DIW Berlin))

  • Viktor Steiner

    (Free University of Berlin, DIW Berlin and IZA)

Abstract

In view of rising poverty rates, the introduction of a legal minimum wage has become an important policy issue in Germany. We analyze the distributional effects of a nationwide minimum wage of 7.50e per hour based on a micro-simulation model accounting for interactions between wages, the tax-benefit system, and net household incomes. Due to the existing system of means-tested income support, the minimum wage would be ineffective in reducing poverty in the overall population, although poverty among singles and families with children or with a female household head would be slightly reduced.

Suggested Citation

  • Kai-Uwe Müller & Viktor Steiner, 2009. "Would a Legal Minimum Wage Reduce Poverty? A Micro-simulation Study for Germany," Journal of Income Distribution, Ad libros publications inc., vol. 18(3-4), pages 131-151, September.
    • Handle: RePEc:jid:journl:y:2009:v:18:i:3-4:p:131-151
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    Citations

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    Cited by:

    1. Grünberger Klaus & Narazani Edlira & Filauro Stefano & Kiss Áron, 2022. "Social and fiscal impacts of statutory minimum wages in EU countries: a microsimulation analysis with EUROMOD," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 12(1), pages 1-39, January.
    2. Müller, Kai-Uwe & Steiner, Viktor, 2010. "Labor market and income effects of a legal minimum wage in Germany," Discussion Papers 2010/11, Free University Berlin, School of Business & Economics.

    More about this item

    Keywords

    minimum wage; working poor; poverty reduction; micro-simulation;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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